Cachet-conscious Chinese feel allure of Apple's iPhone

BEIJING -- The store clerk polished the iPhone 4 as though it were a diamond. Then he reverentially handed it to Liu Jia.

"You have to have it. It's like religion," said Liu, a 29-year-old public relations manager. "I don't think a lot of people understand the essence of the iPhone, but it looks cool and it makes you a star in front of your friends."

Apple infatuation has officially arrived in the land of 800 million-plus mobile phone users.

The recent launch of the iPhone 4 on mainland China created a frenzy, with fighting breaking out among shoppers at Apple's flagship store, located in a high-end shopping and bar area of Beijing called Sanlitun. The store had to be closed to restore order. Shortly after the latest version of the iPhone officially went on sale Sept. 25, Apple's carrier partner, China Unicom, announced it had received 200,000 pre-orders, even though the country is already swamped with "grey market" iPhone 4s brought in from Hong Kong and the United States.

Compared with Americans and consumers in other developing countries, relatively few Chinese lined up for Apple products. But the intensity of those who do underscores the importance of high-end products for newly wealthy Chinese, many of whom are willing to pay above suggested retail prices to get their hands on devices like the iPhone 4 before others do.

Cupertino, Calif.-based Apple, after years of effectively ignoring the country with the world's largest number of mobile phone and Internet users, is now aggressively courting Chinese consumers.

Products like the iPhone and iPad are hitting the Chinese market faster than ever before -- the iPhone 4 went on sale just about three months after its U.S. release, while it took more than two years between the debut of the first version of the iPhone and its rollout in China.

During the company's second-quarter conference call with analysts, Chief Operating Officer Tim Cook said revenue for China, Hong Kong and Taiwan was nearly $1.3 billion -- more than a 200 percent jump from the same period a year ago.

Piper Jaffray analyst Gene Munster estimates that China represents about 5 percent of the company's sales; he expects that to double sometime between 2015 and 2020.

Apple would not comment on its China strategy.

"It's critical that Apple is in China," Needham & Co. analyst Charles Wolf said. "There is a strong move toward conspicuous consumption, and that means there is a strong move to buy Apple products."

A status symbol in China

It's not uncommon for Chinese to spend two months' salary -- or more -- on an iPhone, which costs about $750 for a 16-gigabyte model without a contract. Some Chinese don't even make calls with the device because it's too expensive; instead, it's used to send text messages, said Shaun Rein, managing director of Shanghai-based China Market Research Group.

"They use the iPhone as a status symbol to show their sophistication in the world, even though they can't afford it," he said.

Apple's lure goes beyond the iPhone. Wen Diren, along with his wife, Shi Guoling, visited the Sunlitun Apple store last week to check out the iPad. "I just came to try it out, and I fell in love with it," he said, cradling the new 16-gigabyte iPad he bought for a little less than $600, about $100 more than what the device sells for in the United States.

Like all infatuations, though, there is a risk the attraction is temporary -- or that obstacles could impede a long-term relationship.

"Apple hasn't learned how to tackle markets that have very different characteristics from the United States," Shanghai-based Gartner analyst Sandy Shen said.

"There are a lot of shanzhai," or fake mobile phones, said Jixin Huang, investment manager with expertise in China's mobile market at Innovation Works, an early-stage start-up venture fund. "They are everywhere."